United Kingdom debt burden to rocket under no-deal Brexit, says think-tank


Finance minister Sajid Javid announced 13.4 billion pounds of extra spending on health, policing, schools and other areas last month - putting borrowing on course to overshoot a cap of 2% of GDP targeted by his predecessor, Philip Hammond.

In its Green Budget report, the think tank said: "Given the massive uncertainty over the direction of the economy and public finances, it is hard to conceive of a set of fiscal rules in the short term that would be appropriately constraining and give the chancellor flexibility to respond to bad economic news".

The IFS and Citi argued that reversing Brexit would produce the best outcome for the economy, with GDP more than 4% higher in 2022 than under a no-deal scenario.

It will continue to closely monitor the effects of the temporary tariff regime on the United Kingdom economy and has announced an exceptional review process will be used to make changes to the temporary tariff regime if necessary after exit day.

The Institute for Fiscal Studies believes that any no-deal Brexit would see United Kingdom debt rise to levels unseen since the 1960s.

The body stated that "securing a Brexit deal would be better for the economy over the next two to three years than another delay", adding that "some pent-up investment should occur, and consumer confidence would improve, as the risk of a no-deal Brexit recedes".

The IFS said the government's budget targets had lost credibility and it was now set to spend nearly as much on day-to-day public services as planned by the opposition Labour Party before an election in 2017, promises which drew criticism from the ruling Conservative Party.

"The government is now adrift without any effective fiscal anchor".

A no-deal Brexit would likely require a fiscal short-term stimulus followed by a swift return to austerity.

It found that a no-deal Brexit will hit the United Kingdom economy the hardest and drag down growth.

Johnson said that it would be "crucial" for government spending programmes to be temporary, while experts have pointed out that the British economy has already reduced by around 60 billion pounds since the country voted exit the European Union in June 2016. A further delay to Brexit would extend the uncertainty weighing on investment and growth, it said.

Whether - and if so how and when - the United Kingdom leaves the European Union will be perhaps the key determinant of growth over the next few years.

He said that in the event of no-deal, any measures to support the economy would have to be strictly temporary.

"But with the chances of us leaving in less than four weeks without a deal increasing by the day, the Prime Minister has missed a real opportunity to back British farmers".